Mass Merchandisers - US

Published by: Mintel International Group Ltd.

Published: Jul. 1, 2008 - 90 Pages

Table of Contents

Scope and Themes

What you need to know

Definition

Data sources

Consumer survey data

Abbreviations and terms

Abbreviations

Terms

Executive Summary

The bottom line

Mass merchandisers are fueling growth in retail sales, and economic conditions indicate consumers will continue to favor these retailers

Competitive context

Wal-Mart excels by offering the lowest prices

Target emphasizes style and low prices

Kmart rebuilding customer base and image

Costco, mass merchandiser of the affluent

Sam’s Club, the everyman’s warehouse club

Brand qualities

Custom consumer groups

Market Size and Forecast

Key points

Mass merchandiser sales are outpacing overall retail sales

Figure 1: Total U.S. sales and forecast of mass merchandisers, at current and inflation-adjusted

Total retail sales growth has slowed over the review period

Figure 2: Total U.S. retail sales, at current and inflation-adjusted prices, 2003-08

Warehouse clubs and supercenters account for the largest share of the mass merchandiser channel

Figure 3: Proportion of total U.S. retail sales from mass merchandisers, 2003-08

Segment Performance

Key points

Sales through warehouse clubs and supercenters expected to increase by more than a third through 2008

Figure 4: Total U.S. sales at warehouse clubs/supercenters at current and inflation-adjusted prices, 2003-13

Discount department stores that do not sell food are slowing overall retail sales growth rate

Figure 5: Total U.S. sales at discount department stores at current and inflation-adjusted prices, 2003-13

Market Background

Key points

Cost of fuel is driving people into Wal-Mart and other mass merchandisers

Figure 6: Change in gas prices, all types and regular, 2000-08

Increase in global demand for goods, rising fuel prices drives up CPI

Figure 7: Change in selected Consumer Price Indices, 2000-08

A drop in household income is compelling people to shop more at mass merchandisers

Figure 8: Median household income, by race/ethnicity, 1980-2006

Rising unemployment undermines confidence in the economy

Figure 9: Work force and unemployment statistics, 2000-08

Competitive Context

Key points

Price, location, store cleanliness/layout - critical influencers

Figure 10: Primary factors that drive consumer channel decisions, agree summary by household income, May 2008

When money is tight, the price must be right

Location, location, location

Store appearance is a top concern

Customer service

One-stop shopping

Product mix and brand availability - secondary influencers

Figure 11: Secondary factors that drive consumer channel decisions, agree summary, May 2008

Popular brands: if you stock them, customers will come

Specialty offerings

How green is your retailer?

Figure 12: Target’s Rogan clothing line television ad, 2008

Wanted: retailers concerned about the local community

Figure 13: Target and the community television ad, 2008

Leading Companies

Key points

Wal-Mart leads mass merchandiser category in terms of sales, but Costco the leader in sales per outlet

Figure 14: Sales for leading mass merchandisers, 2006/07-2007/08

Figure 15: Number of outlets for leading mass merchandisers, 2006/07-2007/08

Figure 16: Sales per outlet for leading mass merchandisers, 2006/07-2007/08

Wal-Mart dominates the channel, but Target and club stores have high appeal to affluent consumers

Figure 17: Mass Merchandisers shopped at during the last three months, by household income, May 2000

Figure 18: Mass Merchandisers shopped most often, by household income, May 2000

Costco’s super premium offerings/Wal-Mart’s low prices to propel future growth

Figure 19: Whether retailers will be shopped with more, less or the same frequency in next year, May 2008

Brand Analysis—Wal-Mart

Key points

Food and beverage offerings propel Wal-Mart’s dominance

Figure 20: Trends in departments shopped at Wal-Mart, 2003-07

Clothing and accessories is Wal-Mart’s most commonly shopped category, but perhaps not the most lucrative

Little difference in departments shopped at Wal-Mart by household income

Figure 21: Departments shopped at Wal-Mart in last three months, by household income, January-November 2007

Wal-Mart’s personal care/household product offerings - another key to success

Figure 22: Whether Wal-Mart is first choice for selected product categories, May 2008

Most influential factors for shopping at Wal-Mart shared by the average mass merchandiser shopper

Figure 23: Importance of factors that drive decisions of what mass merchandiser to shop at Wal-Mart only, May 2008

Families with children represent Wal-Mart’s core customer base

Figure 24: Incidence of shopping Wal-Mart in last three months, by custom consumer groups, January-November 2007

Asian respondents least likely to shop Wal-Mart

Figure 25: Incidence of shopping Wal-Mart in last three months, by race/ethnicity, January-November 2007

Brand Analysis—Target

Key points

Target competes effectively in clothing/accessories, but incidence of key category purchases is far lower than at Wal-Mart

Figure 26: Trends in departments shopped at Target, 2003-07

Target to make more room for its most lucrative categories

More affluent Target shoppers purchase a wider range of categories

Figure 27: Departments shopped at Target in last three months, by household income, January-November 2007

Target is less likely to be first choice in most categories

Figure 28: Whether Target is first choice for selected product categories, May 2008

Cleanliness and layout more important to Target shoppers

Figure 29: Importance of factors that drive decisions of what mass merchandiser to patronize, Target only, May 2008

Young, affluent women represent core Target shopper segments

Figure 30: Incidence of shopping Target in the last three months, by custom consumer groups, January-November 2007

Brand Analysis—Kmart

Key points

Trends in departments shopped show little change from 2003-07

Figure 31: Trends in departments shopped at Kmart, 2003-07

Departments shopped at Kmart differ notably by age

Figure 32: Departments shopped at in Kmart in the last three months, by age of head of household, January-November 2007

Key consumer cohort: grandparents

Figure 33: Incidence of shopping Kmart in the last three months, by custom consumer groups, January-November 2007

Even those who tend to favor Kmart over other mass merchandisers rarely cite it as a first choice retailer

Figure 34: Whether Kmart is first choice for selected product categories, May 2008

Kmart falls short on key consumer measures

Figure 35: Importance of factors that determine Kmart as mass merchandiser of choice, May 2008

Brand Analysis—Costco

Key points

Costco attracts affluent customers and performs well on premium products

Food/drug department is where Costco excels

Figure 36: Trends in departments shopped at, at Costco, 2003-07

Age plays a role in departments shopped at

Figure 37: Departments shopped at Costco in last three months, by age of head of household, January-November 2007

Costco is the first choice for food/beverage among frequent shoppers

Figure 38: Whether Costco is first choice for selected product categories, May 2008

Costco customers motivated by the same factors that drive competitors’ customers

Figure 39: Importance of factors that drive decisions to shop at Costco, May 2008

Costco shoppers are an active and cultured group

Figure 40: Incidence of shopping Costco in the last three months, by custom consumer groups, January-November 2007

Brand Analysis—Sam’s Club

Key points

Figure 41: Incidence of shopping mass merchandisers in past three months, by household income, May 2008

Figure 42: Trends in departments shopped at, at Sam’s Club, 2003-07

Departments shopped varies by household income

Figure 43: Departments shopped at Sam’s Club in last three months, by household income, January-November 2007

Sam’s Club first choice for food for nearly half of respondents who prefer the store

Figure 44: Whether Sam’s Club is first choice for selected product categories, May 2008

Brand Analysis—BJ’s Wholesale Club

Key points

Despite strong northeastern presence, BJ’s can still compete nationally

Figure 45: Incidence of shopping at BJ’s Wholesale Clubs in last three months, by region, January-November 2007

Incidence of shopping food/drug department up since 2003

Figure 46: Trends in departments shopped at BJ’s Wholesale clubs, 2003-07

Younger shoppers surprisingly more likely to visit clothing and cosmetics departments

Figure 47: Departments shopped at BJ’s Wholesale Club in last three months, by age of head of household, January-November 2007

Brand Analysis—Big Lots

Key points

Big Lots - not your typical mass merchandiser

Key customer base includes young adults and families with kids

Figure 48: Incidence of shopping Big Lots in last three months, by selected demographics, May 2008

Brand Qualities

Key points

Costco’s premium store brand resonates with shoppers

Figure 49: Incidence of buying store brand products, May 2008

Wal-Mart’s pitching to families creates brand affinity

Figure 50: Wal-Mart Graphic Tees television ad, 2007

Figure 51: Wal-Mart Tailgate television ad, 2008

Wal-Mart’s green offerings create a sense of community

Figure 52: Wal-Mart Green television ad, 2008

Target’s chic ads emphasize youth and energy

Figure 53: Target Messages television ad, 2008

Target focuses on the “whole” consumer

Figure 54: Target Long Live television ad, 2008

Innovation and Innovators

Key points

Wal-Mart’s sustainability mission

Costco’s appeal to the affluent

Wal-Mart cashes in on customers’ windfalls

In-store media creates new opportunities to communicate value

Appendix: Other Useful Consumer Tables

Retailers patronized in last three months

Figure 55: Incidence of shopping at mass merchandisers in last three months, by selected demographics, January-November 2007

Figure 56: Trends in retailers shopped in last three months, 2003-07

Repertoire of retailers shopped

Figure 57: Repertoire of discounters and warehouse clubs shopped at in last three months, by race/ethnicity, January-November 2007

Figure 58: Repertoire of discounters and warehouse clubs shopped at in last three months, by age of head of household, January-November 2007

Retailers shopped most often

Figure 59: Retailers shopped most often, by household income, May 2008

Figure 60: Retailers shopped most often, by gender, May 2008

Figure 61: Retailers shopped most often, by age, May 2008

Figure 62: Retailers shopped most often, by race/ethnicity, May 2008

Figure 63: Retailers shopped most often, by region, May 2008

Frequency of shopping selected retailers in previous four weeks

Figure 64: Trends in number of times discounters and warehouse clubs shopped per month, 2005-07

Departments shopped at discounters

Figure 65: Departments shopped at discounters and warehouse clubs, January-November 2007

Figure 66: Products bought at discounters/warehouse clubs/supercenters in past three months, May 2008

Figure 67: Whether retailer is first choice for selected product categories, May 2008

Importance of factors in determining which retailer to shop

Figure 68: Importance of factors that drive decisions of what mass merchandiser to shop at, by retailer, May 2008

Appendix: Simmons Cohorts

Figure 69: Married couples cohorts

Figure 70: Single women cohorts

Figure 71: Single men cohorts

Appendix: Trade Associations

Abstract

This report provides a consumer-centric analysis of the mass merchandise channel. The focus is primarily upon supercenters (i.e., discount retailers who sell a wide variety of goods, including perishable foods) and club stores, which provide discounted rates on bulk items to customers who have paid a membership fee.

The discussion begins with an analysis of how macro-level economic factors such as the rising unemployment rate and faltering consumer confidence are serving to drive increasingly frugal customers into discount stores. Specifically, the report addresses the following questions:

• What decision making criteria commonly influence consumer decisions about where to shop?
• What is the influence of price and location compared to other factors such as the retailer's commitment to sustainability or the local community?
• How is the demographic composition of club store shoppers similar to or distinct from that of supercenters?
• Which mass merchandisers do the affluent shop at and why?
• What categories have the greatest influence on decisions of which mass merchandiser to shop at?

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